An Economic Briefing with Anatole Kaletsky

An Island of Stability in a World of Chaos - or - An Island of Chaos in the World of Stability? - This was the key message arising from Anatole’s characteristically carefully chosen words to a packed house of clients at the Dorchester Hotel.

The global economy is improving and increasingly stable with the US leading. The prospects for Europe have improved vastly due to the ECB’s QE policies. The UK has performed very well, but is overly dependent on importing international capital. Anatole’s fear is that international perceptions of a business unfriendly or generally unstable government will encourage foreign investors to look elsewhere.

A Labour-led government is possible because the success of Tory economic management has been undermined by stagnating living standards the result of rapid population growth (immigration) which has caused GDP per capita to remain low. Living standards are improving only slowly.

Nevertheless, in the event of a Labour-led government, it is unlikely to last more than a year, as its policies will lead to financial instability— the value of sterling will fall and the foreign investment that supports the UK economy will dry up. A Tory-led government could also prove short-lived, due to its pursuit of an EU referendum.

Greece has diverted much attention away from Britain’s issues and Anatole fears that resolving the Greek crisis, which is imminent, will mean that foreign investors will turn their attention the Britain. They might not like what they see. Anatole was not predicting a disaster, but that the environment for international capital inflows will likely be less supportive. Although UK GDP growth is likely to slow a little in in 2015, the retention of low interest rates will aid relatively strong performance through 2016.

The global economy is improving and increasingly stable with the US leading. The prospects for Europe have improved vastly due to the ECB’s QE policies. The UK has performed very well, but is overly dependent on importing international capital. Anatole’s fear is that international perceptions of a business unfriendly or generally unstable government will encourage foreign investors to look elsewhere.

A Labour-led government is possible because the success of Tory economic management has been undermined by stagnating living standards the result of rapid population growth (immigration) which has caused GDP per capita to remain low. Living standards are improving only slowly.

Nevertheless, in the event of a Labour-led government, it is unlikely to last more than a year, as its policies will lead to financial instability— the value of sterling will fall and the foreign investment that supports the UK economy will dry up. A Tory-led government could also prove short-lived, due to its pursuit of an EU referendum.

Greece has diverted much attention away from Britain’s issues and Anatole fears that resolving the Greek crisis, which is imminent, will mean that foreign investors will turn their attention the Britain. They might not like what they see. Anatole was not predicting a disaster, but that the environment for international capital inflows will likely be less supportive. Although UK GDP growth is likely to slow a little in in 2015, the retention of low interest rates will aid relatively strong performance through 2016.